20171110-招商证券_香港_-舜宇光学科技-02382.HK-Focus_on_potential_upside_in_2018__Lift_TP_to_HK_157_6页_686kb

Sunny Optical (2382 HK) Company Report Summary

Core Content and Key Points

Sunny Optical (2382 HK) is a key player in the optical components industry, with a focus on high-end products and strong growth in both handset and vehicle lens segments. The report highlights the company's potential for upside in 2018, with an upgraded target price (TP) of HK$157 and a "BUY" rating. The analysis is based on improved financial performance, strategic partnerships, and market share gains.

Main Viewpoints

• Growth Momentum: Sunny Optical's October shipments for HCM and HLS grew by 12% and 39% YoY respectively, indicating continued demand for high-end products. Auto lens shipments also increased by 34% YoY.
• Technology Leadership: The company's early investment in MantisVision and partnership with AMS (Apple's 3D sensing supplier) position it to lead in the development and supply of 3D sensing camera solutions, particularly for high-end models.
• Margin Improvement: The report estimates that the gross margin (GPM) for HCM products will reach 13.5% and 13.4% in 2H17 and FY18, respectively, due to better utilization and scale. Handset lens GPM is expected to rise to 51% and 58% in the same periods, driven by higher allocation from Chinese brands and Samsung upgrades.
• Earnings Upside: The company's FY17E-19E EPS is raised by 11-17%, reflecting higher average selling prices (ASP) and margins from faster lens upgrades and share gains.
• Valuation: The stock is currently trading at 28.8x FY18E P/E, which is a 44% premium over global peers. The report justifies this valuation based on the company's technology leadership and strong earnings growth.
• Catalysts: Upcoming product launches, progress in 3D sensing, and monthly shipment data are expected to drive further re-rating of the stock.

Key Financial Highlights

SOTP-Based Valuation and Target Price

The report uses a SOTP (Sum of the Parts) valuation method to derive the new TP of HK$157, based on a target P/E multiple of 32.5x FY18E EPS. The target P/E is applied differently across business segments:

• Camera modules: 30x P/E
• Handset lenses: 35x P/E
• Vehicle lenses: 40x P/E
• Others: 25x P/E

Key Assumptions and Financial Outlook

• Revenue Growth: Expected to grow at a CAGR of 37% (FY17E-18E) and 21% (FY18E-19E).
• Gross Margin: Projected to improve from 20.6% in FY17E to 22.6% in FY19E.
• Net Margin: Expected to increase from 11.2% in FY17E to 13.1% in FY19E.
• ROIC: Estimated to rise from 20.6% in FY15 to 46.0% in FY19E, reflecting improved operational efficiency.

Shareholding and Market Data

• Market Cap (HK$ mn): 14,165.7
• Avg. Daily Volume (10k): 757.6
• 52-Week Range (HK$): 32.4–140.0
• Shareholding Structure:
  • Sun Xu Ltd: 35.47%
  • JP Morgan Chase & Co: 4.81%
  • Wenjian Wang: 3.08%

Risks and Opportunities

• Opportunities:
  • Continued share gains in HCM products.
  • Strong growth in high-end handset and vehicle lenses.
  • Strategic partnership with AMS for 3D sensing solutions.
  • Improved GPM and margin due to better scale and product mix.
• Risks:
  • Potential slowdown in smartphone demand.
  • Increased ASP/margin pressure from HCM competition.
  • Weaker vehicle lens shipment than expected.

Investment Rating

• Company Rating: BUY
• Industry Rating: OVERWEIGHT

Upcoming Catalysts

• Product launches
• 3D sensing progress
• Monthly shipment data

Conclusion

Sunny Optical is well-positioned for growth due to its strong market share, strategic investments, and product innovation. The report reiterates a "BUY" rating with an updated TP of HK$157, citing strong financial performance and industry leadership. The company is expected to benefit from the adoption of new technologies and continued demand for high-end optical components.